FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                Quarterly Report Pursuant to Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

For the Quarter Ended                               Commission File Number
September 30, 1996                                          0-13331


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
             (Exact Name of Registrant as specified in its Charter)

Delaware                                     16-1234990
--------------------                         -----------------------------------
(State of Formation)                         (IRS Employer Identification No.)

2350 North Forest Road
Suite 12-A
Getzville, New York  14068
(Address of Principal Executive Office)

Registrant's Telephone Number:      (716) 636-0280


Indicate  by a check mark  whether  the  Registrant:  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.   Yes  X   No
                                                ---     ---

Indicate by a check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein,  and will not be contained,  to
the best of the  registrant's  knowledge,  in definitive  proxy or information
statements  incorporated  by  reference  in part III of this  Form 10-Q or any
amendment to this Form 10-Q.   (X)

As of  September  30, 1996,  the issuer had 15,551 units of limited  partnership
interest outstanding.















<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
               ---------------------------------------------------

                                      INDEX
                                      -----



                                                                      PAGE NO.
                                                                      --------
PART I:     FINANCIAL INFORMATION
-------     ---------------------

            Balance Sheets -
                  September 30, 1996 and December 31, 1995              3

            Statements of Operations -
                  Three Months Ended September 30, 1996 and 1995        4

            Statements of Operations -
                  Nine Months Ended September 30, 1996 and 1995         5

            Statements of Cash Flows -
                  Nine Months Ended September 30, 1996 and 1995         6

            Statements of Partners' (Deficit) Capital -
                  Nine Months Ended September 30, 1996 and 1995         7

            Notes to Financial Statements                             8 - 19


PART II:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
--------    FINANCIAL CONDITION AND RESULTS OF OPERATIONS            20 - 21
            ---------------------------------------------





















                                     -2-

<PAGE>

              REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                                 BALANCE SHEETS
                    September 30, 1996 and December 31, 1995
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                         September 30,   December 31,
                                                               1996           1995
                                                         ------------    ------------
<S>                                                      <C>             <C>    
ASSETS
------

Property, at cost:
     Land                                                $  1,410,000    $  1,410,000
     Buildings and improvements                            17,238,605      17,238,605
     Furniture and fixtures                                 2,275,548       2,275,548
                                                         ------------    ------------
                                                           20,924,153      20,924,153
     Less accumulated depreciation                          9,816,340       9,283,886
                                                         ------------    ------------
          Property, net                                    11,107,813      11,640,267

Investment in joint venture                                   107,996         167,321

Cash                                                             --              --
Cash - security deposits                                       54,944          53,989
Accounts receivable, net of allowance for doubtful
     accounts of $1,006,977 and $800,839, respectively         23,352          21,238
Other assets                                                  777,536         520,876
                                                         ------------    ------------

            Total Assets                                 $ 12,071,642    $ 12,403,691
                                                         ============    ============


LIABILITIES AND PARTNERS' (DEFICIT)
-----------------------------------

Liabilities:
     Cash overdraft                                      $     27,979    $     36,921
     Mortgages payable                                     10,103,269      10,276,248
     Accounts payable and accrued expenses                  1,153,016         777,976
     Accounts payable - affiliates                          1,511,072       1,258,243
     Accrued interest                                         110,786          88,868
     Security deposits and prepaid rents                      379,755         269,591
                                                         ------------    ------------
            Total Liabilities                              13,285,877      12,707,847
                                                         ------------    ------------

Partners' (Deficit) Capital:
     General partners                                        (454,701)       (427,399)
     Limited partners                                        (759,533)        123,243
                                                         ------------    ------------
           Total Partners' (Deficit)                       (1,214,235)       (304,156)
                                                         ------------    ------------

           Total Liabilities and Partners' (Deficit)     $ 12,071,642    $ 12,403,691
                                                         ============    ============
</TABLE>

                        See notes to financial statements

                                       -3-

<PAGE>
               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF OPERATIONS
                 Three Months Ended September 30, 1996 and 1995
                                   (Unaudited)

                                                     Three Months   Three Months
                                                        Ended          Ended
                                                    September 30,  September 30,
                                                         1996          1995
                                                         ----          ----
Income:
     Rental                                         $   960,342     $ 1,180,685
     Interest and other income                           90,424          41,351
                                                    -----------     -----------
     Total income                                     1,050,766       1,222,036
                                                    -----------     -----------

Expenses:
     Property operations                                720,759         779,418
     Interest:
          Paid to affiliates                             35,150          24,163
          Other                                         305,847         310,633
     Depreciation and amortization                      186,488         187,387
     Administrative:
          Paid to affiliates                            153,307         227,704
          Other                                          73,685           3,524
                                                    -----------     -----------
     Total expenses                                   1,475,236       1,532,829
                                                    -----------     -----------

Loss before allocated loss from joint venture          (424,470)       (310,793)

Allocated loss from joint venture                       (39,703)        (11,296)
                                                    -----------     -----------

Net loss                                            $  (464,173)    $  (322,089)
                                                    ===========     ===========

Loss per limited partnership unit                   $    (28.95)    $    (20.09)
                                                    ===========     ===========

Distributions per limited partnership unit          $      --       $      --
                                                    ===========     ===========

Weighted average number of
     limited partnership units
     outstanding                                         15,551          15,551
                                                    ===========     ===========







                        See notes to financial statements

                                       -4-

<PAGE>
               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF OPERATIONS
                  Nine Months Ended September 30, 1996 and 1995
                                   (Unaudited)

                                                     Nine Months   Nine Months
                                                        Ended         Ended
                                                    September 30,  September 30,
                                                        1996           1995

Income:
     Rental                                         $ 3,015,990     $ 3,437,309
     Interest and other income                          228,914         167,068
                                                    -----------     -----------
     Total income                                     3,244,904       3,604,377
                                                    -----------     -----------

Expenses:
     Property operations                              1,926,737       2,325,416
     Interest:
          Paid to affiliates                            107,978          64,774
          Other                                         870,577         923,872
     Depreciation and amortization                      559,164         560,002
     Administrative:
          Paid to affiliates                            298,417         485,010
          Other                                         332,785         288,461
                                                    -----------     -----------
     Total expenses                                   4,095,658       4,647,535
                                                    -----------     -----------

Loss before allocated loss from joint venture          (850,754)     (1,043,158)

Allocated loss from joint venture                       (59,325)        (53,867)
                                                    -----------     -----------

Net loss                                            $  (910,079)    $(1,097,025)
                                                    ===========     ===========

Loss per limited partnership unit                   $    (56.77)    $    (68.43)
                                                    ===========     ===========

Distributions per limited partnership unit          $      --       $      --
                                                    ===========     ===========

Weighted average number of
     limited partnership units
     outstanding                                         15,551          15,551
                                                    ===========     ===========







                       See notes to financial statements

                                       -5-

<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 1996 and 1995
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                         Nine Months    Nine Months
                                                            Ended          Ended
                                                        September 30,  September 30,
                                                            1996           1995
                                                            ----           ----
<S>                                                    <C>             <C>   
Cash flow from operating activities:
     Net loss                                          $  (910,079)    $(1,097,025)

Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization                         559,164         560,002
     Loss from joint venture                                59,325          53,868
Changes in operating assets and liabilities:
     Cash - security deposits                                 (955)          2,543
     Accounts receivable                                    (2,114)         (4,257)
     Other assets                                         (283,370)       (161,678)
     Accounts payable and accrued expenses                 375,040         508,947
     Accrued interest                                       21,918            --
     Security deposits and prepaid rent                    110,164         (31,462)
                                                       -----------     -----------
Net cash provided by (used in) operating activities        (70,907)       (169,062)
                                                       -----------     -----------

Cash flow from investing activities:
     Capital expenditures                                     --              --
     Distributions from joint venture                         --              --
                                                       -----------     -----------
Net cash provided by investing activities                     --              --
                                                       -----------     -----------

Cash flows from financing activities:
     Cash overdraft                                         (8,942)           --
     Accounts payable - affiliates                         252,829         377,795
     Principal payments on mortgages and notes            (172,979)       (213,828)
     Distributions to partners                                --              --
                                                       -----------     -----------
Net cash (used in) provided by financing activities         70,907         163,967
                                                       -----------     -----------

Increase (decrease) in cash                                   --            (5,095)

Cash - beginning of period                                    --             8,534
                                                       -----------     -----------

Cash - end of period                                   $      --       $     3,439
                                                       ===========     ===========


Supplemental Disclosure of Cash Flow Information:
     Cash paid for interest                            $   848,659     $   923,872
                                                       ===========     ===========
</TABLE>

                        See notes to financial statements

                                       -6-

<PAGE>

              REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                    STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
                  Nine Months Ended September 30, 1996 and 1995
                                   (Unaudited)


                                         General             Limited Partners
                                        Partners
                                         Amount           Units         Amount
                                         ------           -----         ------

Balance, January 1, 1995             $  (385,610)         15,551    $ 1,474,437

Net loss                                 (32,911)           --       (1,064,114)
                                     -----------     -----------    -----------

Balance, September 30, 1995          $  (418,521)         15,551    $   410,323
                                     ===========     ===========    ===========


Balance, January 1, 1996             $  (427,399)         15,551    $   123,243

Net loss                                 (27,302)           --         (882,776)
                                     -----------     -----------    -----------

Balance, September 30, 1996          $  (454,701)         15,551    $  (759,533)
                                     ===========     ===========    ===========



























                        See notes to financial statements


                                       -7-

<PAGE>

             REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                          NOTES TO FINANCIAL STATEMENTS
                Nine Months Ended September 30, 1996 and 1995
                                   (Unaudited)


1.   GENERAL PARTNER'S DISCLOSURE

     In the opinion of the  General  Partners  of  Realmark  Property  Investors
     Limited   Partnership   III,  all   adjustments   necessary  for  the  fair
     presentation  of  the   Partnership's   financial   position,   results  of
     operations,  and changes in cash flows for the nine months ended  September
     30, 1996 and 1995 have been made in the financial statements. The financial
     statements are unaudited and subject to any year-end  adjustments which may
     be necessary.

2.   FORMATION AND OPERATION OF PARTNERSHIP

     Realmark Property Investors Limited Partnership III (the "Partnership"),  a
     Delaware Limited Partnership,  was formed November 18, 1983, to invest in a
     diversified portfolio of income-producing real estate.

     In February 1984 the Partnership  commenced the public offering of units of
     limited partnership interest.  Other than matters relating to organization,
     it had no  business  activities  and,  accordingly,  had not  incurred  any
     expenses  or earned any income  until the first  interim  closing  (minimum
     closing) of the offering which occurred April 26, 1984. All items of income
     and expense arose subsequent to this date. On January 31, 1985 the offering
     was concluded,  at which time 15,551 units of limited partnership  interest
     were  outstanding.  The General Partners are Realmark  Properties,  Inc., a
     Delaware  corporation,  the corporate  General  Partner,  and Mr. Joseph M.
     Jayson,  the  individual  General  Partner.  Joseph  M.  Jayson is the sole
     shareholder of J.M. Jayson & Company,  Inc. (JMJ) and Realmark  Properties,
     Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc.

     Under the Partnership  agreement,  the General  Partners and affiliates can
     receive  compensation for services  rendered and reimbursement for expenses
     incurred on behalf of the Partnership.















                                       -8-

<PAGE>


     FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)

     Net  income  or  loss  arising  from  the  sale  or  refinancing  shall  be
     distributed  first to the limited partners in an amount  equivalent to a 7%
     return on the average of their adjusted capital  contributions,  then in an
     amount  equal to their  capital  contributions,  then an amount equal to an
     additional 5% of the average of their adjusted capital  contributions after
     the general  partners receive a disposition fee, then to all partners in an
     amount equal to their respective positive capital balances, and finally, in
     the ratio of 87% to the limited partners and 13% to the general partners.

     Partnership  income or loss not arising from sale or  refinancing  shall be
     allocated 97% to the limited partners and 3% to the general partners.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash
     ----

     For  purposes of reporting cash flows,  cash includes the following  items:
     cash on hand; cash in checking; and money market savings.

     Cash - security deposits
     ------------------------

     Cash - security  deposits  represents  cash on deposit in  accordance  with
     terms  of  a  U.S.  Department  of  Housing  and  Urban  Development  (HUD)
     regulatory  agreement  for  multi-family  housing  projects  under  Section
     223(f).

     Property and depreciation
     -------------------------

     Depreciation  is provided using the straight-line method over the estimated
     useful lives of the respective  assets.  Expenditures  for  maintenance and
     repairs are expensed as incurred,  and major renewals and  betterments  are
     capitalized.  The  Accelerated  Cost Recovery  System are used to calculate
     depreciation expense for tax purposes.

     Rental income
     -------------

     Leases  for  residential   properties  have  terms  of one  year  or  less.
     Commercial leases generally have terms of one to five years.  Rental income
     is recognized on the straight-line method over the term of the lease.








                                        -9-

<PAGE>

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

     Investment in Joint Venture

     The interest in joint venture is accounted for on the equity method.

4.   ACQUISITION AND DISPOSITION OF RENTAL PROPERTY

     In August 1984 the Partnership acquired a 112 unit apartment complex (Bryn
     Mawr) located in Ypsilanti,  Michigan for a purchase  price of  $1,833,554,
     which included  $134,857 in acquisition  fees. In 1985 the acquisition fees
     related  to  the  purchase  of  Bryn  Mawr  were  reduced  by  $18,600  and
     reallocated to properties by the Partnership that year.

     In August 1986 the  Bryn Mawr Apartments were sold for $3,110,000.  The net
     cash proceeds of  approximately  $667,000 from the sale were distributed to
     the investors on a pro rata basis.  The  Partnership  recognized a gain for
     financial  statement purposes of $1,475,313.  For income tax purposes,  the
     gain will be recognized under the installment sale method.

     In  February 1985 the  Partnership  acquired a 190 unit  apartment  complex
     (Castle Dore) in Indianapolis,  Indiana for a purchase price of $4,601,233,
     which included acquisition fees of $414,279.

     In February  1985 the  Partnership  acquired a 208 unit  apartment  complex
     (Parc  Bordeaux)  in   Indianapolis,   Indiana  for  a  purchase  price  of
     $2,845,064, which included acquisition fees of $371,233.

     In December 1988 the Partnership  sold Parc Bordeaux  Apartments for a sale
     price  of  $5,300,000  which  generated  a total  net  gain  for  financial
     statement purposes of $2,338,067. For income tax purposes, the gain will be
     recognized under the installment sale method.

     In  June  1985  the  Partnership  acquired  a 200  unit  apartment  complex
     (Williamsburg South Apartments) in Atlanta, Georgia for a purchase price of
     $5,138,745, which included acquisition fees of $368,745.

     In August 1985 the Partnership acquired a 38,500 square foot office complex
     (Perrymont) in Pittsburgh, Pennsylvania for a purchase price of $2,078,697,
     which included acquisition fees of $168,697.










                                      -10-

<PAGE>


     ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)

     In  October  1985 the  Partnership  acquired a 130 unit  apartment  complex
     (Pleasant  Run) in  Cincinnati,  Ohio for a purchase  price of  $3,434,728,
     which included acquisition fees of $267,228.

     In December  1985 the  Partnership  acquired a 280 unit  apartment  complex
     (Ambassador Towers, formerly Cedar Ridge) in Monroeville,  Pennsylvania for
     a  purchase  price  of  $6,766,424,  which  included  acquisition  fees  of
     $646,424.

5.   INVESTMENT IN JOINT VENTURES

     In April 1985 the  Partnership  entered  into an  agreement  and formed the
     Inducon  Joint  Venture - Amherst  (the  Joint  Venture),  for the  primary
     purpose of constructing office/warehouse buildings in Erie County, New York
     as income producing property. The site is part of the Amherst Foreign Trade
     Zone.  This is U.S.  Customs  Territory  under federal  supervision,  where
     foreign and domestic  merchandise  is brought for  storage,  manufacturing,
     salvage,  repair, exhibit,  repacking,  relabeling or re-export.  Under the
     terms of the joint venture agreement,  the Partnership supplied $545,000 of
     capital to acquire the land and undertake  initial  development  of Phase I
     and $275,000 for Phase II. The other Joint Venturer delivered and completed
     on behalf of the Joint Venture all plans,  specifications,  maps,  surveys,
     accounting pro-formas for construction, initial leasing and operations, and
     cost estimates with respect to development.

     Ownership of the Joint Venture is divided  equally  between the Partnership
     and the other Joint Venturer. The Joint Venture agreement provides that the
     Partnership will be allocated 95% of any income or loss.

     Net cash flow from the Joint Venture is to be distributed as follows:

     To the  Partnership  until  has  received  a return  of 7% per annum on its
     underwritten  syndicated  equity. To the extent a 7% return is not received
     from year to year, it will accrue and be paid from the next  available cash
     flow.

     To the  other  Joint  Venturer  in an  amount  equal  to  that  paid to the
     Partnership. No amount will accumulate in favor of the other investor.

     Any remaining amount will be divided equally.













                                     -11-

<PAGE>

     INVESTMENT IN JOINT VENTURES (CONTINUED)

     To the extent there are net proceeds  from any sale or  refinancing  of the
     subject  property,  the  proceeds  will be paid in the  following  order of
     priority:

     To  the  Partnership  to  the  extent  the 7%  per  annum  returned  on its
     underwritten equity is unpaid.

     Next to the  Partnership  until it has  received  an overall 9%  cumulative
     return on its underwritten equity.

     Next to the Partnership  until it has received an amount equal to its total
     underwritten  equity,  reduced by any prior distribution of sale, financing
     or refinancing proceeds.

     Next to the  Partnership  until it has received a  cumulative  20% per year
     return on its total underwritten equity.

     Thereafter   any  remaining  net  proceeds  will  be  divided  50%  to  the
     Partnership and 50% to the other joint venturer.

     A summary of the assets, liabilities and capital of the joint venture as of
     September 30, 1996 and December 31, 1995 and the results of its  operations
     for the nine months ended September 30, 1996 and 1995 is as follows:

























                                      -12-

<PAGE>

                         INDUCON JOINT VENTURE - AMHERST
                                 BALANCE SHEETS
                    September 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>

                                                           September 30,   December 31,
                                                               1996            1995
                                                               ----            ----
<S>                                                         <C>           <C> 
ASSETS
------

Property, at cost:
     Land                                                   $  177,709    $  177,709
     Land improvements                                         221,399       221,399
     Buildings and improvements                              3,070,246     3,072,913
     Equipment                                                   8,466         8,466
     Furniture and fixtures                                      2,101         2,101
                                                            ----------    ----------
                                                             3,479,921     3,482,588
     Less accumulated depreciation                           1,171,299     1,074,688
                                                            ----------    ----------
          Property, net                                      2,308,622     2,407,900

Cash and cash equivalents                                         --         157,789
Other assets                                                    53,196        39,925
Deferred debt expense, net of accumulated
     amortization of $287,416 and $273,372, respectively        48,966        28,841
                                                            ----------    ----------

                 Total Assets                               $2,410,784    $2,634,455
                                                            ==========    ==========


LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Liabilities:
     Cash overdraft                                         $   52,261    $     --
     Bonds payable                                                --       2,040,000
     Mortgage payable                                          283,976       292,033
     Notes payable                                           1,852,602          --
     Accounts payable and accrued expenses                      63,720        87,679
     Accounts payable - affiliates                              37,835        31,906
                                                            ----------    ----------
                 Total Liabilities                           2,290,394     2,451,618
                                                            ----------    ----------

Partners' Capital:
     The Partnership                                           107,996       167,321
     Other joint venturer                                       12,394        15,516
                                                            ----------    ----------
                Total Partners' Capital                        120,390       182,837
                                                            ----------    ----------

                Total Liabilities and Partners' Capital     $2,410,784    $2,634,455
                                                            ==========    ==========
</TABLE>



                                      -13-


<PAGE>

                         INDUCON JOINT VENTURE - AMHERST
                            STATEMENTS OF OPERATIONS
                  Nine Months Ended September 30, 1996 and 1995

                                                       Nine Months  Nine Months
                                                         Ended         Ended
                                                     September 30, September 30,
                                                          1996          1995
                                                          ----          ----

Income:
     Rental                                            $ 330,077     $ 296,275
     Interest and other income                            10,061         5,138
                                                       ---------     ---------
     Total income                                        340,138       301,413
                                                       ---------     ---------

Expenses:
     Property operations                                  74,804        66,491
     Interest                                            157,087       135,194
     Depreciation and amortization                       124,242       131,334
     Administrative                                       46,452        25,097
                                                       ---------     ---------
     Total expenses                                      402,585       358,116
                                                       ---------     ---------

Net loss                                               $ (62,447)    $ (56,703)
                                                       =========     =========


Allocation of net loss:

     The Partnership                                   $ (59,325)    $ (53,868)
     Other Joint Venturer                                 (3,122)       (2,835)
                                                       ---------     ---------

                                                       $ (62,447)    $ (56,703)
                                                       =========     =========


A reconciliation  of the  Partnership's  investment in the joint venture for the
nine month period ended September 30, 1996 is as follows:

                                                          1996
                                                          ----

Investment in joint venture - beginning of period      $ 167,321
Allocated loss                                           (59,325)
                                                       ---------

Investment in joint venture - end of period            $ 107,996
                                                       =========




                                      -14-

<PAGE>

6.   MORTGAGES AND NOTES PAYABLE

     Castle Dore
     -----------

     A mortgage of  $2,137,621  and  $2,184,518  at September 30, 1996 and 1995,
     respectively,  bearing interest at 7.50%. The mortgage  provides for annual
     principal  and  interest  payments  of  $216,026  payable in equal  monthly
     installments through September 1, 2014. The carrying amount of the mortgage
     of $1,550,076 and $1,565,602 at September 30, 1996 and 1995,  respectively,
     reflects an  unamortized  mortgage  discount of  $587,545  and  $618,916 at
     September  30,  1996 and 1995,  respectively.  The  discount is based on an
     imputed  interest  rate of 12.5% and will be  amortized  using the interest
     method over the remaining term of the mortgage.

     Williamsburg South

     A 12.85% mortgage which provides for annual principal and interest payments
     of $341,602  payable in equal monthly  installments  through December 1999.
     The mortgage had a balance of $2,404,770 at September 30, 1996.

     Perrymont
     ---------

     A mortgage  which  provides  for  interest  rates and monthly  installments
     through December 1998 as follows:

             Year            Rate         Payment
             ----            ----         -------

             1995            7.50%        $   7,907  (Interest only)
             1996            7.875%       $   9,660  (Principal and interest)
             1997 - 1998     8.50%        $   10,187 (Principal and interest)

     The  outstanding  balance at September 30, 1996 and 1995  respectively  was
     $1,262,275  and $1,265,185  (principal  payments have just begun being made
     this quarter).

     Pleasant Run
     ------------

     A 10%  mortgage  with a  balance  of  $2,205,152  at  September  30,  1996,
     providing for annual principal and interest payments of $245,349 payable in
     equal monthly installments, with the remaining balance due August 1, 1998.










                                      -15-

<PAGE>

     MORTGAGES AND NOTES PAYABLE (CONTINUED)

     Ambassador Towers (formerly Cedar Ridge)
     ----------------------------------------

     A mortgage  with a balance of $449,089 and  $475,922 at September  30, 1996
     and 1995,  respectively,  bearing interest at 7.75%. The mortgage  provides
     for monthly  principal  and interest  payments of $8,980  through  April 1,
     2002.

     A mortgage  with a balance of  $1,238,107  and  $1,477,232 at September 30,
     1996 and  1995,  respectively,  bearing  interest  at 8.75%.  The  mortgage
     provides for monthly  principal  and interest  payments of $20,455  through
     October 1, 2003.

     A mortgage with a balance of $993,799 and  $1,000,000 at September 30, 1996
     and 1995,  respectively  which provides for interest payments at prime rate
     plus 2% (10.25% at September 30, 1996).  The mortgage was originally due in
     September  1994,  but in September 1995 the General  Partner  negotiated an
     extension until May 1996. The Partnership  continues to utilize a temporary
     extension while it seeks refinancing for the loan.

     The  aggregate  maturities of the mortgages for each of the next five years
     and thereafter are as follows:

             Year                         Amount
             ----                         ------

             1996                         $   1,319,177
             1997                               349,132
             1998                             2,525,632
             1999                             3,849,622
             2000                                74,225
             Thereafter                       2,925,584
                                          -------------

                                             11,043,303
             (Unamortized discount)         (   767,055)
                                          -------------

             TOTAL                        $ 10,276,248
                                          ============
















                                      -16-

<PAGE>

7.   RELATED PARTY TRANSACTIONS

     Management fees for the management of Partnership's  properties are paid to
     an affiliate of the General Partner.  The management agreement provides for
     5% of gross monthly  rental  receipts of the complex to be paid as fees for
     administering  the operations of the property.  These fees totaled $169,200
     and  $114,739  for the nine  months  ended  September  30,  1996 and  1995,
     respectively.

     According to the terms of the Partnership  agreement,  the general partners
     are  entitled to receive a  Partnership  management  fee equal to 7% of net
     cash  flow  (as  defined  in the  Partnership  agreement),  2% of  which is
     subordinated to the limited  partners having received an annual cash return
     equal to 7% of their adjusted capital  contributions.  No such fee has been
     paid or accrued by the  Partnership for the nine months ended September 30,
     1996 and 1995.

     The general partners are also allowed to collect property  disposition fees
     upon sale of acquired  properties.  This fee is not to exceed the lesser of
     50% of amounts customarily  charged in arm's-length  transactions by others
     rendering similar services for comparable  properties or 2.75% of the sales
     price.  The  property  disposition  fee is  subordinate  to payments to the
     limited partners of a cumulative annual return (not compounded) equal to 7%
     of their average  adjusted capital balances and to repayment to the limited
     partners of an amount equal to their capital contributions.

     The general  partners have not to date  received a  disposition  fee on the
     sale of Bryn  Mawr or Parc  Bordeaux,  as the  limited  partners  have  not
     received a return of 7% on their average adjusted capital or their original
     capital as defined in the Partnership agreement.  Once the limited partners
     receive their original  capital and a 7% return,  the general partners will
     be entitled to disposition fees of 2.75%.

     Accounts  payable - affiliates  amounted to  $1,511,072  and  $1,064,172 at
     September 30, 1996 and 1995, respectively.  The payable represents fees due
     to the general  partner or to affiliates of the general  partner.  Interest
     charged on amounts due affiliates totaled $107,978 and $64,774 for the nine
     month periods ended September 30, 1996 and 1995.















                                      -17-

<PAGE>

     RELATED PARTY TRANSACTIONS (CONTINUED)

     Pursuant to the terms of the Partnership  agreement,  the corporate general
     partner  charges the  Partnership  for  reimbursement  of certain costs and
     expenses  incurred by the corporate  general  partner and its affiliates in
     connection with the  administration of the Partnership.  These charges were
     for the  Partnership's  allocated  share  of  costs  and  expenses  such as
     payroll, travel and communication, costs related to partnership accounting,
     and partner's communication and relations.

     Computer  service  charges  for the  Partnership  are paid or accrued to an
     affiliate  of the  General  Partner.  The fee is based  upon the  number of
     apartment  units and totaled $7,020 for the nine months ended September 30,
     1996 and 1995.

8.   INCOME TAXES

     No provision has been made for income taxes since the income or loss of the
     Partnership  is to be  included  in  the  tax  returns  of  the  individual
     partners.

     The tax returns of the  Partnership  are subject to  examination by federal
     and state  taxing  authorities.  Under  federal and state  income tax laws,
     regulations  and rulings,  certain  types of  transactions  may be accorded
     varying  interpretations  and,  accordingly,  reported  Partnership amounts
     could be changed as a result of any such examination.

     The  reconciliation  of net loss for the nine month periods ended September
     30, 1996 and 1995 as reported in the statements of operations, and as would
     be reported for tax purposes respectively, is as follows:

                                              September 30,     September 30,
                                               1996                   1995
                                               ----                   ----

      Net loss -
           Statement of operations             $  (910,079)     $(1,097,025)
      (Add to)  deduct from:
           Difference in depreciation            (  64,323)      (   62,800)
           Difference in amortization               49,293           32,861
           Non-deductible expenses                 188,688           41,853
           Difference in loss of joint venture       4,836           10,400
                                               -----------      -----------
             
      Net loss for tax purposes                $ (731,585)       $(1,074,711)
                                               ==========        =========== 



                                      -18-

<PAGE>

     INCOME TAXES (CONTINUED)

     The reconciliation of partner's (deficit) capital at September 30, 1996 and
     December  31, 1995 as reported in the balance  sheets,  and as reported for
     tax purposes, is as follows:

                                             September 30,          December 31,
                                                 1996                    1995
                                                 ----                    ----

      Partner's (Deficit) Capital -
       balance sheet                       $   (1,214,235)        $    (304,156)
       Add to (deduct from):
            Accumulated difference in
            depreciation                       (3,988,973)           (3,924,650)
            Accumulated difference in
            amortization                           60,987                11,694
            Syndication fees and selling
            expenses                            1,842,060             1,842,060
            Gain on sale of property            ( 817,092)            ( 817,092)
            Other non-deductible expenses         995,443               806,755
            Difference in book and tax
            depreciable cost basis                915,085               915,085
            Difference in book and tax
            basis of investments                 (738,764)             (743,600)
            Other                               (  69,286)            (  69,286)
                                           --------------         -------------

      Partner's (Deficit) Capital -
       tax return                          $   (3,014,775)         $ (2,283,190)
                                           ==============          ============ 


9.   PENDING SALES

     On July 16, 1996 the Corporate  General  Partner entered into a contract on
     behalf of the Partnership to sell Castle Dore Apartments, Ambassador Towers
     (formerly Cedar Ridge Apartments), Pleasant Run Apartments and Williamsburg
     South Apartments at sales prices of $5,500,000,  $5,800,000, $3,350,000 and
     $4,831,000,   respectively.   The  contract  is  subject  to  a  number  of
     contingencies as were described in Form 8-K filed on July 31, 1996. No firm
     closing date on the sale has been established to date.










                                        -19-

<PAGE>

PART II:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources
-------------------------------

The General Partner continues to fund the Partnership's shortfalls in cash flow,
although  under no  obligation  to do so. In the first nine months of 1996,  the
General Partner  advances have increased by over $252,000.  Such advances to the
Partnership are considered payable on demand to the General Partner, and at this
point in time,  there is no assurance  that these  advances will  continue.  The
Partnership once again did not make any  distributions  during the third quarter
of 1996,  and is not  likely to make any in the  future  until  all  Partnership
obligations are satisfied and the General Partner is reimbursed for the advances
it has made to the Partnership.

Low  occupancy  at  several  properties  in  this  partnership  continues  to be
problematic;  economic  occupancy  levels at Ambassador  Towers  (formerly Cedar
Ridge), Pleasant Run and Perrymont Office Building declined from last quarter to
this quarter.  At Ambassador Towers and Pleasant Run,  occupancy averaged merely
70% during the third quarter of 1996. In an effort to turn this situation around
and rent up the buildings,  management  has not only made  personnel  changes at
those  sights  which  are  struggling,  but also  changed  their  marketing  and
advertising strategy.

Management  is  optimistic  that  occupancy  levels  at the  properties  in this
Partnership  will begin seeing an  improvement in the next quarter as the "peak"
rental season reaches its conclusion.  Attractive  incentive plans have been put
in place to  bring in new  tenants;  plans  for  capital  improvements,  such as
exterior painting and repairs to woodwork, are also in place. Management is also
hopeful  that  the  pending  sale(s)  of  various  of  the  properties  in  this
partnership will continue to move closer to finality.

Results of Operations:
----------------------

Net loss for the three  month  period  ended  September  30,  1996  amounted  to
$464,173 or $28.95 per limited  partnership unit versus a net loss for the three
month  period  ended  September  30,  1995 of  $322,089  or $20.09  per  limited
partnership  unit.  For the nine month period ended  September  30, 1996 the net
loss incurred was $910,079 versus a loss of $1,097,025 for the nine month period
ended September 30, 1995.

On a tax basis,  the  Partnership  generated  a loss of  $731,585  or $45.63 per
limited  partnership  unit for the nine month period ended September 30, 1996 as
compared to a tax loss of $1,074,711 or $67.04 per limited  partnership unit for
the nine month period ended September 30, 1995.


                                      -20-

<PAGE>

Results of Operations  (continued):
---------------------  ------------

Partnership revenue for the quarter ended September 30, 1996 totaled $1,050,766,
a decrease of $171,270  from the same period in 1995.  For the nine month period
ended  September  30, 1996 total  income  decreased  by over  $359,000  from the
corresponding  period in 1995.  Rental  income for the nine month  period  ended
September 30, 1996,  totaled  $3,015,990,  which was a decrease of over $421,000
over the same time  period in 1995.  The  decrease  is  directly  related to the
decrease in occupancy at several of the  complexes,  such as  Ambassador  Towers
(formerly Cedar Ridge) and the Perrymont Office Building. Additionally, in order
to boost  occupancies,  significant  rental  concessions  are being offered thus
contributing  to the drop in income.  Other income  increased  by  approximately
$62,000  between the nine month periods  ended  September 30, 1996 and September
30,  1995  primarily  due  to  increased   laundry  income  at  the  residential
properties.

For the three month period ended  September 30, 1996, the  Partnership  expenses
totaled $1,475,236,  a decrease of over $57,000 from the quarter ended September
30, 1995. For the nine months ended September 30, 1996, the Partnership expenses
totaled $4,095,658, decreasing over $551,000 from corresponding quarter in 1995.
The  majority  of  the  decrease  in  expenses  is a  direct  result  of a  cost
controlling  factors in  property  operations.  Payroll  and  associated  costs,
repairs and  maintenance  and  contracted  service  expenses  are being  closely
monitored at all complexes.  As has been the pattern with virtually all expenses
in the Partnership,  administrative costs continue to decrease;  the decrease is
primarily  related to the decrease in investor service and portfolio  management
charges.  Depreciation  and  amortization  expense  continues  to remain  fairly
consistent with that of the prior year.

Management  is  confident  that  the  Partnership   will  be  able  to  continue
controlling its costs, and it is now making every effort to increase occupancies
in those complexes that are struggling with lower levels.  Management feels that
the last quarter of 1996 will show additional  improvements in the  occupancies,
as well as continual declines in property expenditures.















                                      -21-

<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
               ---------------------------------------------------


                                     PART II
                                     -------

                                OTHER INFORMATION
                                -----------------


Item 1 - Legal Proceedings
--------------------------

The Partnership is not a party to, nor are any of the  Partnership's  properties
subject to any material pending legal proceedings  other than ordinary,  routine
litigation incidental to the Partnership's business.

Items 2, 3, 4 and 5
-------------------

Not applicable.

Item 6 - Exhibits and reports on Form 8-K
-----------------------------------------

Exhibit 27 - Financial Data Schedule (Electronic filing only)

Reports on Form 8-K - None.






















                                      -22-

<PAGE>
                                   SIGNATURES
                                   ----------


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP III



By:   /s/Joseph M. Jayson                       January 2, 1997 
      ------------------------------            ------------------------
      Joseph M. Jayson,                         Date
      Individual General Partner



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated.


By:   REALMARK PROPERTIES, INC.
      Corporate General Partner

      /s/Joseph M. Jayson                       January 2, 1997  
      ------------------------------            ------------------------
      Joseph M. Jayson,                         Date
      President and Director



      /s/Michael J. Colmerauer                  January 2, 1997  
      ------------------------------            ------------------------
      Michael J. Colmerauer                     Date
      Secretary